Pre-Budget straddle
Option prices often climb in the days before the Union Budget as traders pay up for protection against a big move. This strategy tries to ride that climb rather than the event itself. It buys the at-the-money NIFTY straddle at 15:20 five sessions before the Budget session and sells it at 15:20 on the session before the speech, so it is out before implied volatility collapses after the announcement.How it trades
Results
PRE-BUILT · DEFAULTSWhere it made and lost money
The test year contains a single Budget, so there is one trade and no way to split results by market condition. That trade, bought on 23 Jan 2026 and sold on 30 Jan 2026, lost ₹6,633 before costs. The idea depends on implied volatility rising faster in the week before the speech than the straddle loses to time decay, and on NIFTY moving in the meantime. In this instance the run-up in volatility was not enough to cover a week of decay. A judgement on the idea needs many years of Budgets, not one.
The same trades, split by the market conditions around each entry, before costs.About this strategy
- Take the Union Budget speech dates from the settings; if the market is shut that day, use the next session.
- Five trading sessions before the Budget session, at 15:20, buy one lot of the ATM call and put of the nearest NIFTY expiry that falls after the Budget.
- Optionally, buy a strangle instead, with the call and put a set percentage either side of the forward price.
- Hold with no stop and no target.
- Sell both options at 15:20 on the session before the Budget, or on the Budget session itself if set to do so.
Why traders use it
Scheduled events push up implied volatility as they approach, because nobody wants to be caught short of options when the news lands. After the event, that premium drains away quickly, the so-called IV crush. Buying a week early and selling the day before is an attempt to capture the build-up without being exposed to the crush. It also gives the position a few sessions to benefit from any pre-Budget swings in NIFTY.
The year in plain words
On NIFTY from 1 Oct 2025 to 30 Sep 2026 there was one Union Budget, so the strategy made exactly one trade with default settings. Bought on 23 Jan 2026 and sold on 30 Jan 2026, the straddle lost ₹6,633 before costs. Costs on two legs bought and sold once were small, and the after-costs loss was ₹6,736. One trade cannot show whether the pre-Budget volatility run-up is a repeatable effect; outcomes are known to vary widely from year to year and with the choice of entry day.
What the settings do
Risks
- The whole premium paid can be lost if volatility does not rise and NIFTY stays flat.
- One trade a year makes any edge almost impossible to confirm statistically.
- Results swing a lot with the entry day chosen, so small rule changes can flip the outcome.
- Budget dates must be updated each year, and special or interim Budgets need adding by hand.
Who it suits
Traders interested in event-driven option buying who want a defined-risk, once-a-year trade, and who are comfortable treating each year's result as a single observation rather than proof.
Questions traders ask
Should you buy a straddle before the Budget?
Many traders buy straddles before the Budget expecting a big move. The catch is that option prices already rise in anticipation and fall sharply after the speech. This strategy instead sells before the speech, aiming to profit from the rise in option prices rather than the move itself.
Is the pre-Budget long straddle profitable?
In this test from 1 Oct 2025 to 30 Sep 2026 the single trade lost ₹6,633 before costs and ₹6,736 after ₹20 per order and bid-ask slippage (statutory charges not included). One trade says very little, and past results do not guarantee future ones.
What is IV crush after the Budget?
Before a big event, implied volatility rises because the outcome is uncertain. Once the news is out, that uncertainty disappears and implied volatility drops quickly, often cutting option prices even if the market moves. Holding long options through the announcement exposes the buyer to that drop.
When is the Union Budget presented?
The Union Budget is usually presented on 1 February, and markets have held special sessions when it fell on a weekend. Election years can bring an interim Budget and a later full Budget. The dates used here are set in the “Budget dates” setting.